Trade going bananas?

December 29, 1998

Nothing's easier than slicing a banana, but slicing up the international market for bananas is a whole different matter. The United States and Europe are having a terrible time agreeing on how it should be done, and the World Trade Organization (WTO) - along with the more orderly global trade system it represents - could get diced up in the process.

None of this is unavoidable. The WTO has already ruled on the case, siding with the US and the US-owned companies who complain that the EU's rules blatantly favor European fruit distributors.

Europe ought to abide by the WTO ruling and lower the barriers to bananas carrying US brands Chiquita and Dole. So far, it has offered only relatively slight adjustments. Those steps are subject to WTO review, but the EU is impeding that process.

The US, on the other hand, should not overplay its hand. Washington's economic stake in bananas is quite small - few US jobs hang on the outcome (though many thousands of jobs in Central America do). Nevertheless, the US has trumpeted its intention to put retaliatory tariffs on nearly $600 million of European speciality items.

A complicating factor is the political clout of Chiquita's chief executive Carl Lindner. He contributes heavily to both major US parties and has the ear of important people in Washington. European officials have suggested there is more political than economic impetus behind the "banana wars."

US officials would be wise to keep the decibels down, but remain firm that this is a test case for the WTO, which should be allowed to function.

It's also an opportunity to maintain momentum toward lower trade barriers at a time when protectionist impulses are growing. Bananas could all too easily turn into steel and other commodities.